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11/16/2021

Tyson Tapping AI, Predictive Analytics in New Plan It Expects to Save $1 Billion

Lisa Johnston
Senior Editor
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Tyson Foods has managed labor challenges throughout the pandemic but said they’re seeing a light at the end of the tunnel. Editorial credit: Tada Images / Shutterstock.com
Tyson Foods has managed labor challenges throughout the pandemic but said they’re seeing a light at the end of the tunnel. Editorial credit: Tada Images / Shutterstock.com

Tyson Foods is investing in such technologies as artificial intelligence and predictive analytics as part of a new productivity plan it anticipates will deliver $1 billion in cost savings by fiscal 2024.

The company reported fiscal fourth-quarter revenue of $12.8 billion, up from $11.4 billion in the prior-year period. Sales gains were primarily driven by higher average sales prices.

Elevated customer demand during the year outpaced its ability to supply products, and, as with other consumer goods companies, Tyson has been navigating input inflation, rising transportation costs, and labor constraints. The latter obstacle was cited by the company as specifically affecting volumes, which were down 4% for the quarter.

[See also: Tyson Foods Selling Pet Treats Biz to General Mills For $1.2B]

To address labor challenges and make the company a more attractive work environment, Tyson pointed to its efforts to raise average pay to $24 per hour; increase investments in diversity, equity and inclusion efforts; and experiment with such things as childcare and on-site health clinics.

Though labor has been an ongoing challenge for the company since the onset of the pandemic, they are seeing a light at the end of the tunnel in getting its plants fully staffed, said Donnie King, Tyson president and CEO, in an earnings call.

“We're very optimistic about '22,” he noted.

To further address capacity constraints, the company, which includes such brands as Jimmy Dean, Hillshire Farm and Ball Park in its portfolio, is constructing 12 new plants, including nine chicken plants, two case-ready beef and pork plants, and one bacon plant.

It’s also accelerating investments in automation and advanced technologies intended to make existing jobs safer and easier while reducing costs, with the new productivity program targeted to deliver $300 million to $400 million of savings during fiscal 2022 and $1 billion in recurring productivity savings by the end of fiscal 2024.

The program includes $300 million in costs savings through greater efficiencies in finance, human resources and procurement. Leveraging artificial intelligence and predictive analytics, as well as other digital solutions, are expected to deliver more than $250 million in recurring savings through greater efficiencies in the supply chain, as well as operations, planning, logistics and warehousing.

[See also: CPGs Weigh Vaccine Mandates and Upskilling To Keep Supply Chain Flowing]

King cited the example of using technology to ensure shipments are optimally loaded, in turn reducing freight costs and increasing customer service levels.

“In many ways the pandemic has already accelerated our push to more digital footing, and our commitment in this space will continue that focus,” he noted.

Tyson will leverage automation and robotics technologies to automate difficult and higher turnover positions, such automating the debone process within its poultry harvest facilities using a combination of third-party and proprietary technologies.

It will also invest in digital and automation initiatives that drive out waste, minimize bureaucracy, and enhance decision making speed across the business, which King called the heart of the new program.

Of the $2 billion the company expects to invest in fiscal 2022 — an increase of about $800 million — a disproportionate share will be allocated to new capacity and automation objectives. 

As has become consistent across the consumer goods industry, Tyson intends to continue raising prices in 2022 to offset increasing input and logistics costs.

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